Miyabe on Japanese consumer debt (courtesy of Mat)

[Yoshie Furuhashi <furuhashi.1@xxxxxxx>]

> From Miyuki Miyabe, All She Was Worth, Houghton Mifflin (Mariner
Books), 1992 (Jp.), 1996, 1999 (Eng. Trans).

It was the Marui Department store that set the ball rolling back in
1960.  Of course, their little Red Card is one of the most famous
retailer credit cards now, but things were very different then.  All
they actually did was decide to use the English word "credit" in
place of the familiar *kappu*, or "payment by installment."  Don't
forget, 1960 was the year of the U.S.-Japan Security Pact.  That same
year, Diner's Club was established.

1960 was also the first year of the so-called era of rapid growth.
As the economy took off, a credit industry became necessary.  Indeed,
without such retail financing, I doubt whether the Japanese economy
or our standard of living would ever really have gotten off the
ground.  But there's been no turning back since then.

Well, let's see.  I used the term "retail financing" just now.  It
would be more exact to say "consumer lending."  This can be roughly
divided into two parts.  First, there's "credit sales," which is
basically your credit card industry.  The other type is "consumer
loans" -- loans against fixed deposits or with postal savings as
collateral, your bank overdrafts and the like.  The term, "consumer
loans," encompasses
borrowing against credit cards and even the so-called finance
companies -- you know, the places people refer to as "loan sharks."

The first category, "credit sales," further divides into
"installment" and "non-installment" schemes, each of which can be
further sub-divided into "single-item" and "cardholder."

Now, according to our data for 1990, if we look at credit sales, and
first at the installment type, the amount of newly extended credit
came to eleven and a half trillion yen.  For the non-installment type
it came to almost twelve trillion.  In the other large category,
consumer loans, the data for the same year comes to three times that,
or nearly thirty-four trillion yen.  Adding the two together brings
the total to -- Well over fifty-seven trillion yen in consumer
lending in 1990.  An industry on the scale of the national budget, is
what it is.

Call it fifty-seven trillion.  That's fourteen percent of Japan's
gross national product for that year.  Or twenty percent of our per
capita disposable income.  In America the figures are about the same.

The growth in the volume of consumer lending is nothing short of
astounding.  In 1980, the total was approaching 21,5 trillion.  Let's
make an index where this figure equals one hundred.  Well, five years
later, in 1985, that index stood at 165, for a grand total of 34.75
trillion.  By 1990, the index climbs to 272.  It's almost tripled in
just ten years.

The money market is a ghost.  But it's a ghost that casts a
disproportionate shadow beside our social reality.  Consumer
financing has swollen out of all proportion.

Just for fun, let's look at the number of credit cards issued.
According to data for the fiscal year ending in March 1983, it was
57.5 million cards.  By 1985, nearly 87 million cards.  By 1990, it's
up to over 166 million cards.

I've been talking about credit cards as if they were all the same,
but in fact these too can be divided into several groups.  Actually,
there are three main types.  First, there's the bank-issued cards:
the UC Group, the DC Group, the JCB Group, VISA Japan -- ten
companies all told.  These claim the lion's share and have the
highest figures both for number of cards and frequency of use.  Here
we see a 20.2% increase in the growth rate between 1983 and 1990.
Next come the non-bank cards: Nihon Shipman, Oriental Finance,
Greater Mercantile -- about eight companies, counting only the major
players.  Their growth rate is 16.1%, which again is huge.  Next,
there's what we call retailer-affiliated cards.  Marui, of course,
falls into this category, but these days every department store and
even all the major supermarkets issue their own cards, right?

The typical scenario for getting deep into debt goes like this.
First a person gets himself a credit card.  He finds it handy for
shopping, for taking trips.  It's nice and simple, and one card does
the trick quite well.  Then pretty soon, without thinking much about
it, he gets himself a couple more.  Assuming that he's a regular
company employee, he shouldn't have any trouble with the screening
procedures.  The department stores, banks, and supermarkets will all
encourage him to take out cards.  Become a cardholder and you'll get
all these discounts and member benefits, they'll say.  Special deals
galore.  So he adds a few more cards to his hand.  Soon enough, he's
using them not just for shopping but for cash as well, again because
they're so convenient.  Now he's made that imperceptible shift from
*using* credit cards to *borrowing against* them.  This happens
almost before a person realizes it.

[skipping good part here how people slip down the slope into major
debt without realizing it.]

So that's when he starts borrowing cash with the card.  In order to
meet his payments to company A, he draws cash on company B's card.
And once he does that, the whole thing starts snowballs to the point
where he can't keep up by borrowing on the card any more.  So what do
you think he does?

Goes to a loan shark?

And with loan sharks he repeats the same cycle.  Some unscrupulous
consumer finance companies even introduce clients to other companies.
Only lower-profile firms, of course, the ones with less capital
clout, who are especially lax in their screening.  They need all the
business they can get, so they don't set a ceiling on total debt.
That's what drives up interest.

[more good stuff snipped here.]

So should we change the structure of things?

Yes. And clamp down on unreasonably high interest rates.  The bigger
loan sharks charge anywhere from twenty-five to thirty-five percent
interest.  Yet they fall into the cracks between the Interest Rate
Control Act and the Revised Financing Statutes.  Itís a gray zone.

Young people are particularly susceptible.  And consumer financing
businesses are really pushing nowadays to expand into the youth
market.  They'll say anything to get a new customer. This year marks
exactly the twentieth since the major city banks first started to
issue credit cards to students.  But in all those years has any
school or university offered instruction on how to use cards
properly?.

The whole problem falls between the cracks in the bureaucracy.
There ought to be one agency keeping track of the whole consumer
credit industry.  Credit sales is the responsibility of the Ministry
of Trade and Development.  Consumer loans comes under the Treasury.

The number of people filing for personal bankruptcy is spiraling too.
In 1984 alone, over twenty thousand cases were filed nationwide.  In
1990, there were twelve thousand cases, but last year it was up to
twenty-three thousand.  This year it's certainly higher than that.